It’s Bonus Season in Banks, But What About Salaries?
As banks gear up for bonus season, another important aspect that often goes unnoticed is the changes in salary structures. Recent reports suggest that at Citi in London, material risk-takers (MRTs) have been signing contracts that actually lower their salaries while frontloading their bonuses.
The Two-Tier Compensation System at Citi
Before these changes, there were complaints about Citi’s two-tier compensation system. Historic managing directors (MDs) received high salaries with limited bonus potential, while new MDs received lower salaries with higher bonus potential. This discrepancy was largely due to the EU bonus cap, which restricted bonuses in London to 2x salaries.
This year, however, the rules have changed. Citi announced that bonuses could go up to 6x salaries, and there was a loosening of deferral conditions for material risk-takers, most of whom are MDs.
Changes in Salary Structure
Insiders reveal that the new lower MRT salaries at Citi are accompanied by bonuses that vest within one year instead of the usual four. This means that MRTs will have to wait two years in total to receive their full bonuses, compared to five years previously.
While the exact decrease in salaries is not specified, it is evident that Citi is realigning its compensation structure to adapt to the changing regulatory landscape. Other banks have been adjusting their fixed pay without reducing salaries by offering additional allowances, a practice that Citi did not follow.
Impact on Employees
Below the MRT level, salary increases at Citi were reported to be haphazard, with some employees receiving no raise at all while others saw significant changes in their compensation packages. In investment banking, performance-based pay seemed to be the norm, with bonuses tied to actual revenues generated rather than potential deals in the pipeline.
One standout performer at Citi this year is Jenny Mai, the head of equity derivative sales in Hong Kong, who reported a 900% increase in PnL. While Citi declined to comment on Mai’s achievement, it is clear that individuals who deliver exceptional results are recognized and rewarded accordingly.
Citi’s Response
Citi has welcomed the changes to remuneration rules for UK Material Risk Takers, emphasizing the importance of aligning compensation structures with regulatory requirements. The bank aims to remain competitive within the UK regulatory landscape while ensuring fair and transparent compensation practices.
Overall, the shifts in salary and bonus structures at Citi reflect a broader trend in the banking industry towards greater transparency, accountability, and alignment with regulatory standards.
For more information on Citi’s salary changes in London, you can visit here.
